On January 6, 2016 we completed the acquisition of Arizona Chemical for a cash purchase price of approximately $1.37 billion, subject to adjustments for cash, indebtedness, working capital, and other items. Commensurate with the acquisition, we are reporting through two operating segments: (i) Polymer Segment and (ii) Chemical Segment.

The results of operations include Arizona Chemical for the period January 6, 2016 through March 31, 2016.

Revenue was $419.9 million in the first quarter 2016 compared to $261.4 million in the first quarter 2015.

Adjusted EBITDA (non-GAAP) was $93.1 million in the first quarter 2016 compared to $49.2 million in the first quarter 2015.

Net income was $88.1 million, or $2.84 per diluted share, in the first quarter 2016 compared to a net loss of $9.5 million, or 0.30 per diluted share, in the first quarter 2015.

Adjusted net income (non-GAAP) was $24.9 million, or $0.80 per diluted share, in the first quarter 2016 compared to $24.2 million, or $0.76 per diluted share, in the first quarter 2015.

On January 29, 2016, we sold certain assets related to our compounding business. The $72.0 million of cash proceeds from the sale were used to pay down existing indebtedness.

"Kraton's first quarter 2016 results reflect solid business performance and continued execution against our stated strategic objectives. Our first quarter 2016 Adjusted EBITDA of $93 million includes $52 million of Adjusted EBITDA from our Polymer segment and $41 million from our newly-acquired Chemical segment," said Kevin M. Fogarty, Kraton's President and Chief Executive Officer. "Building upon the good business momentum we saw in the fourth quarter of 2015, our Polymer segment posted record first quarter Adjusted EBITDA, exceeding the previous record realized in the first quarter 2015. Our Polymer segment posted its second sequential quarter with adjusted gross profit in excess of $1,000 per ton, and although first quarter 2016 results did not benefit from the unit margin expansion that falling raw material prices provided in the first quarter 2015, our first quarter 2016 results do reflect a benefit from lower SG&A costs and an incremental $3.7 million of cost reductions under our $70 million cost reduction initiative. By year end we expect to realize $25-$28 million of the anticipated $70 million cost reduction program in the Polymer segment."

"Results for the Chemical segment reflect stable business performance and profitability, as evidenced by the first quarter 2016 Adjusted EBITDA margin of 23.1 percent. Nevertheless, we see opportunity to improve overall profitability through targeted actions to recover prior period lost sales, specifically in our Chemical Intermediates business, disciplined use of analytical tools to ensure our refinery balances are truly profit-optimal, and by leveraging improved fundamentals of substitute product pricing in both our Adhesive and Chemical Intermediates businesses. In fact, an improved trend was evident as the first quarter evolved," Fogarty added. "Regarding the process of integrating Arizona Chemical, we expect to realize $21-$27 million of the targeted $65 million in transaction synergies in 2016, and we captured $2.9 million of these synergies in the first quarter."

"Lastly, we remain focused on reducing the leverage we incurred to complete the acquisition of Arizona Chemical. During the quarter, we sold certain assets associated with our compounding business for $72 million, and we used the proceeds from the sale to reduce outstanding indebtedness," said Fogarty.

Three months endedMarch 31,

($ in thousands, except per share amounts)

2016

2015

Revenue

$

419,923

$

261,429

Adjusted EBITDA (1)

$

93,101

$

49,249

Net income (loss) attributable to Kraton (GAAP)

$

88,087

$

(9,456)

Adjusted net income attributable to Kraton(1)

$

24,906

$

24,164

Earnings (loss) per diluted share (GAAP)

$

2.84

$

(0.30)

Adjusted earnings per diluted share(1)

$

0.80

$

0.76

_______________________________________

(1)

See Non-GAAP reconciliations included in the accompanying financial tables for the reconciliation of each non-GAAP measure to its most directly comparable GAAP measure.

Q1 2016 VERSUS Q1 2015 RESULTS

Consolidated Results

Revenue was $419.9 million for the three months ended March 31, 2016 compared to $261.4 million for the three months ended March 31, 2015, an increase of $158.5 million or 60.6%. The increase reflects revenue of $176.9 million from the Chemical segment, whose operating results have been included in our consolidated results since January 6, 2016. The negative effect from currency movements reduced revenue by $3.7 million. The remaining $14.7 million, or 5.6%, decline was due to lower average selling prices in our Polymer segment amounting to $20.1 million, driven by lower average raw material costs, partially offset by an increase of $5.5 million due to higher sales volumes in our Polymer segment.

Gross profit was $93.8 million for the three months ended March 31, 2016 compared to $46.6 million for the three months ended March 31, 2015. The increase includes gross profit of $28.3 million from our Chemical segment, which includes $24.7 million of higher costs of goods sold related to the full amortization of the fair value adjustment for inventory under purchase accounting. The increase also includes $3.7 million benefit from the company's cost reduction initiatives and $1.1 million of synergies realized during the three months ended March 31, 2016. Gross profit as a percentage of revenue was 22.3% and 17.8% for the three months ended March 31, 2016 and 2015, respectively.

Research and development expenses were $10.6 million for the three months ended March 31, 2016 compared to $7.9 million for the three months ended March 31, 2015, an increase of $2.6 million, or 33.1%, reflective of the research and development costs of our Chemical segment.

Selling, general, and administrative expenses were $49.9 million for the three months ended March 31, 2016 compared to $26.9 million for the three months ended March 31, 2015, an increase of $22.9 million or 85.0%. The increase was primarily driven by selling, general, and administrative expenses of $20.7 million from our Chemical segment. The remaining increase was attributable to a $6.0 million increase in transaction and acquisition related costs, partially offset by $1.7 million decrease in professional fees, $1.4 million reduction in employee related costs, and $0.4 million positive effect from currency fluctuations. General and administrative expenses reflect a $1.8 million benefit from synergies realized during the three months ended March 31, 2016.

Interest expense, net was $33.8 million for the three months ended March 31, 2016 compared to $6.1 million for the three months ended March 31, 2015, an increase of $27.7 million. The increase was primarily due to additional indebtedness related to the Arizona Chemical Acquisition.

Income tax benefit (expense) was $86.3 million and $(0.1) million for the three months ended March 31, 2016 and 2015, respectively. Following the completion of the Arizona Chemical Acquisition, we reassessed the need for a valuation allowance against our net operating loss deferred tax assets and released $86.6 million of the previously recorded valuation allowance.

Net income attributable to Kraton was $88.1 million or $2.84 per diluted share for the three months ended March 31, 2016, an increase of $97.5 million compared to net loss of $9.5 million or $0.30 per diluted share for the three months ended March 31, 2015. Adjusted diluted earnings per share (non-GAAP) was $0.80 for the three months ended March 31, 2016 compared to $0.76 for the three months ended March 31, 2015. See a reconciliation of GAAP diluted earnings (loss) per share to adjusted diluted earnings per share below.

Polymer Segment Results

Three Months Ended March 31,

2016

2015

Polymer Segment Revenue and Adjusted EBITDA (non-GAAP)

(In thousands)

Cariflex

$

38,023

$

34,837

Specialty Polymers

85,029

91,674

Performance Products

119,919

134,768

Other

72

150

Total Polymer revenue

$

243,043

$

261,429

Polymer Adjusted EBITDA (non-GAAP) (1)

$

52,244

$

49,249

____________________________________________________

(1)

See Non-GAAP reconciliations included in the accompanying financial tables for the reconciliation of each non-GAAP measure to its most directly comparable GAAP measure.

Revenue for the Polymer segment was $243.0 million for the three months ended March 31, 2016 compared to $261.4 million for the three months ended March 31, 2015, a decrease of $18.4 million or 7.0%. The decline was due to lower average selling prices amounting to $20.1 million driven by lower average raw material costs and $3.7 million from the negative effect of currency movements, partially offset by an increase of $5.5 million associated with higher sales volumes. Sales volumes were 75.1 kilotons for the three months ended March 31, 2016, an increase of 0.7 kilotons compared to the three months ended March 31, 2015.

With respect to revenue for the Polymer segment product groups:

Cariflex™ revenue was $38.0 million for the three months ended March 31, 2016 compared to $34.8 million for the three months ended March 31, 2015, an increase of $3.2 million or 9.1%. Cariflex sales volumes increased 11.8% compared to the three months ended March 31, 2015, driven primarily by higher sales into surgical glove applications, which increased revenue by $4.1 million. Lower selling prices due to lower average isoprene raw material costs resulted in a decline of $0.8 million and currency fluctuations had a positive effect of $0.3 million.

Specialty Polymers revenue was $85.0 million for the three months ended March 31, 2016 compared to $91.7 million for the three months ended March 31, 2015. Of the $6.6 million, or 7.2% revenue decrease, $1.2 million was associated with the negative effect of currency fluctuations. The balance of the decline was due to lower average selling prices resulting from lower raw material costs, partially offset by a 1.2% increase in sales volumes. The increase in sales volume was largely due to increased sales into automotive and medical applications, partially offset by lower sales into lubricant additive applications, which was largely attributable to the variability in order timing by a significant customer, and, to a lesser extent, lower sales into personal care applications.

Performance Products revenue was $119.9 million for the three months ended March 31, 2016 compared to $134.8 million for the three months ended March 31, 2015. Of the $14.8 million, or 11.0%, revenue decrease, $2.8 million was associated with the negative effect of currency fluctuations. The balance of the decline was primarily driven by lower average selling prices resulting from lower raw material costs. While we saw increased sales volumes into paving and personal care applications, these increases were offset by lower sales into adhesives and roofing applications.

For the three months ended March 31, 2016, the Polymer segment generated Adjusted EBITDA (non-GAAP) of $52.2 million compared to $49.2 million for the three months ended March 31, 2015. The improvement in Adjusted EBITDA (non-GAAP) compared to the first quarter 2015 reflects lower selling, general and administrative costs, the incremental benefit of our strategic cost reduction program and the increase in sales volume, the combination of which more than offset the impact lower unit margins. Although unit margins for the three months ended March 31, 2016 were unchanged compared to the fourth quarter 2015, margins declined compared to the first quarter of 2015, in which Polymer unit margins benefited from a pronounced decline in raw material prices.

Chemical Segment Results

The results for the Chemical segment are included in the consolidated financial statements for the period January 6, 2016 to March 31, 2016. The 2015 amounts have been derived from the Arizona Chemical historical operating results and are being included for comparative purposes only.

For the periodJanuary 6, 2016through March31, 2016

Three MonthsEnded March 31,2015

Chemical Segment Revenue

(In thousands)

Adhesives

$

62,943

$

71,548

Roads and construction

10,670

10,634

Tires

8,981

9,744

Chemical intermediates

94,286

112,068

Total Chemical Revenue

$

176,880

$

203,994

Revenue for the Chemical segment was $176.9 million from the date of acquisition to March 31, 2016 compared to $204.0 million for the three months ended March 31, 2015, a decrease of $27.1 million, or 13.3% (a $20.2 million, or 9.9% decrease assuming a full calendar quarter in 2016). The negative effect of currency movements accounts for $2.0 million of the revenue decrease. Sales volumes were 94.9 kilotons for the period from January 6, 2016 through March 31, 2016 compared to 100.2 kilotons for the three months ended March 31, 2015. On a full calendar quarter basis, however, first quarter 2016 volume would have been 98.2 kilotons.

With respect to revenue for the Chemical segment product groups:

Adhesives revenue was $62.9 million from the date of acquisition to March 31, 2016 compared to $71.5 million for the three months ended March 31, 2015, a decline of $8.6 million, or 12.0%. On a full calendar quarter basis, however, the decline in revenue would have been $5.5 million, or 7.7%, largely due to lower sales volume of 5.1% compared to the first quarter 2015, in which sales volume was favorably impacted from a competitor's plant outage.

Roads and Construction and Tires revenue on a full calendar quarter basis aggregated $19.9 million from the date of acquisition to March 31, 2016, effectively unchanged compared to $20.4 million for the three months ended March 31, 2015.

Chemical Intermediates revenue was $94.3 million from the date of acquisition to March 31, 2016 compared to $112.1 million for the three months ended March 31, 2015, a decline of $17.8 million, or 15.9%. On a full calendar quarter basis, however, the decline in revenue would have been $14.2 million, or 12.7%. The revenue decline reflects lower average selling prices, and to a lesser extent, lower sales volume. The decline in average selling prices was largely offset by lower cost of goods sold. Currency movements negatively impacted revenue by approximately $1.1 million.

From the date of acquisition to March 31, 2016, Adjusted EBITDA (non-GAAP) for the Chemical segment was $40.9 million. Adjusted EBITDA included turnaround costs of $2.1 million and the negative effect of currency movements aggregating $1.8 million. In the first quarter 2016, progress was made toward achieving the synergy-driven operational cost improvements, with $1.1 million included in Adjusted EBITDA as of March 31, 2016.

CASH FLOW AND CAPITAL STRUCTURE

In connection with the Arizona Chemical Acquisition, we entered a $1,350.0 million six-year senior secured first lien term loan facility and issued $440.0 million in aggregate principal amount of 10.5% senior notes due 2023. In addition, we utilized $37.1 million of our $250.0 million five-year asset-based revolving credit facility. We applied a portion of the acquisition-related proceeds to prepay our previously issued 6.75% Senior Notes ($350.0 million principal amount plus fees and expenses of $8.0 million) and fund $57.1 million of debt issuance costs.

During the first quarter, we applied the $72.0 million of proceeds from the sale of assets relating to our compounding business to lower term loan indebtedness. This debt reduction was partially offset by an aggregate of $36.0 million of cash outflows associated with transaction and integration costs, payment of variable compensation earned in 2015, and costs to achieve synergies. In addition, capital expenditures amounted to $18.9 million excluding capital expenditures associated with the KFPC joint venture.

Summary of principal amounts for indebtedness and net debt:

As of March 31, 2016

As of January 6, 2016

(In thousands)

Term Loan

$

1,278,000

1,350,000

10.5% Senior Notes

440,000

440,000

ABL

50,000

37,075

Capital lease

1,599

1,634

Kraton debt

1,769,599

1,828,709

Kraton cash

67,863

97,400

Kraton net debt

1,701,736

1,731,309

KFPC(1) Loan

91,064

76,912

KFPC(1) cash

10,515

9,315

KFPC(1) net debt

80,549

67,597

Consolidated net debt

$

1,782,285

$

1,798,906

____________________________________________________

(1)

Represents the 50% investment in a joint venture, Kraton Formosa Polymers Corporation (KFPC), located in Mailiao, Taiwan, which we consolidate.

OUTLOOK

Our 2016 full year revenue estimate is now approximately $1.8 billion and our Adjusted EBITDA estimate remains unchanged in the range of $370.0 million to $390.0 million.

We currently estimate that our results in the second quarter 2016 will reflect a negative spread between FIFO and ECRC of approximately $15 million.

We have not reconciled Adjusted EBITDA guidance to net income (loss) because we do not provide guidance for net income (loss) for items that we do not consider indicative of our ongoing performance, including the gain on sale of assets and the spread between FIFO and ECRC, as certain of these items are out of our control and/or cannot be reasonably predicted. Accordingly, a reconciliation of the non-GAAP financial measure guidance to the corresponding GAAP measures is not available without unreasonable effort.

USE OF NON-GAAP FINANCIAL MEASURES

This press release includes the use of both GAAP and non-GAAP financial measures. The non-GAAP financial measures are EBITDA, Adjusted EBITDA, Adjusted Gross Profit and Adjusted Net Income attributable to Kraton (or earnings per share). Tables included in this earnings release reconcile each of these non-GAAP financial measures with the most directly comparable GAAP financial measure. For additional information on the impact of the spread between the FIFO basis of accounting and estimated current replacement cost ("ECRC"), see Management's Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the fiscal year ended December 31, 2015.

We consider these non-GAAP financial measures to be important supplemental measures of our performance and believe they are frequently used by investors, securities analysts and other interested parties in the evaluation of our performance including period-to-period comparisons and/or that of other companies in our industry. Further, management uses these measures to evaluate operating performance, and our incentive compensation plan bases incentive compensation payments on our Adjusted EBITDA performance, along with other factors. These non-GAAP financial measures have limitations as analytical tools and in some cases can vary substantially from other measures of our performance. You should not consider them in isolation, or as a substitute for analysis of our results under GAAP in the United States. For EBITDA, which represents net income before interest, taxes, depreciation and amortization, these limitations include: EBITDA does not reflect the significant interest expense on our debt; EBITDA does not reflect the significant depreciation and amortization expense associated with our long-lived assets; and EBITDA included herein should not be used for purposes of assessing compliance or non-compliance with financial covenants under our debt agreements. The calculation of EBITDA in our debt agreements includes adjustments, such as extraordinary, non-recurring or one-time charges, proforma cost savings, certain non-cash items, turnaround costs, and other items included in the definition of EBITDA in the debt agreements. Other companies in our industry may calculate EBITDA differently than we do, limiting its usefulness as a comparative measure. As an analytical tool, Adjusted EBITDA is subject to all the limitations applicable to EBITDA. We prepare Adjusted EBITDA by eliminating from EBITDA the impact of a number of items we do not consider indicative of our on-going performance, including the spread between FIFO and ECRC, but you should be aware that in the future we may incur expenses similar to the adjustments in this presentation. Our presentation of Adjusted EBITDA should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items. In addition, due to volatility in raw material prices, Adjusted EBITDA may, and often does, vary substantially from EBITDA and other performance measures, including net income calculated in accordance with U.S. GAAP; and Adjusted EBITDA may, and often will, vary significantly from EBITDA calculations under the terms of our debt agreements and should not be used for assessing compliance or non-compliance with financial covenants under our debt agreements. Because of these and other limitations, EBITDA and Adjusted EBITDA should not be considered as a measure of discretionary cash available to us to invest in the growth of our business. As a measure of our performance, Adjusted Gross Profit is limited because it often will vary substantially from gross profit calculated in accordance with U.S. GAAP due to volatility in raw material prices. Finally, we prepare Adjusted Net Income attributable to Kraton by eliminating from net income (loss) the impact of a number of items we do not consider indicative of our on-going performance, including the spread between FIFO and ECRC. Our presentation of non-GAAP financial measures and the adjustments made therein should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items, and in the future we may incur expenses or charges similar to the adjustments made in the presentation of our non-GAAP financial measures.

CONFERENCE CALL AND WEBCAST INFORMATION

Kraton has scheduled a conference call on Thursday, April 28, 2016 at 9:00 a.m. (Eastern Time) to discuss first quarter 2016 financial results. Kraton invites you to listen to the conference call, which will be broadcast live over the internet at www.kraton.com, by selecting the "Investor Relations" link at the top of the home page and then selecting "Events" from the Investor Relations menu on the Investor Relations page.

You may also listen to the conference call by telephone by contacting the conference call operator 5 to 10 minutes prior to the scheduled start time and asking for the "Kraton Conference Call – Passcode: Earnings Call." U.S./Canada dial-in 800-857-6511. International dial-in #: 210-839-8886.

For those unable to listen to the live call, a replay will be available beginning at approximately 11:00 a.m. (Eastern Time) on April 28, 2016 through 1:59 a.m. (Eastern Time) on May 12, 2016. To hear a replay of the call over the Internet, access Kraton's Website at www.kraton.com by selecting the "Investor Relations" link at the top of the home page and then selecting "Events" from the Investor Relations menu on the Investor Relations page. To hear a telephonic replay of the call, dial 888-293-8914.

ABOUTKRATON

Kraton Performance Polymers, Inc. (NYSE "KRA") is a leading global producer of styrenic block copolymers, specialty polymers and high-value performance products derived from renewable sources. Kraton's polymers are used in a wide range of applications, including adhesives, coatings, consumer and personal care products, sealants and lubricants, and medical, packaging, automotive, paving and roofing applications. As the largest global provider in the pine chemicals industry, the company's pine-based specialty products are sold into adhesive, road and construction and tire markets, and it produces and sells a broad range of chemical intermediates into markets that include fuel additives, oilfield chemicals, coatings, metalworking fluids and lubricants, inks, flavors and fragrances and mining. Kraton offers its products to a diverse customer base in over 60 countries worldwide.

Kraton, the Kraton logo and design, and the "Giving Innovators their Edge" tagline are all trademarks of Kraton Polymers LLC.

FORWARD LOOKING STATEMENTS

Some of the statements in this press release contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. This press release includes forward-looking statements that reflect our plans, beliefs, expectations, and current views with respect to, among other things, future events and financial performance. Forward-looking statements are often characterized by the use of words such as "outlook," "believes," "estimates," "expects," "projects," "may," "intends," "plans", "on track", or "anticipates," or by discussions of strategy, plans or intentions, including all matters described on the section titled "Outlook" including, but not limited to, full year 2016 guidance for revenue and Adjusted EBITDA, and second quarter 2016 guidance on the negative spread between FIFO and ECRC.

All forward-looking statements in this press release are made based on management's current expectations and estimates, which involve known and unknown risks, uncertainties, and other important factors that could cause actual results to differ materially from those expressed in forward-looking statements. These risks and uncertainties are more fully described in our latest Annual Report on Form 10-K, including but not limited to "Part I, Item 1A. Risk Factors" and "Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" therein, and in our other filings with the Securities and Exchange Commission, and include, but are not limited to, risks related to: the integration of Arizona Chemical (now, AZ Chem Holdings LP); Kraton's ability to repay its indebtedness; Kraton's reliance on third parties for the provision of significant operating and other services; conditions in the global economy and capital markets; fluctuations in raw material costs; limitations in the availability of raw materials; competition in Kraton's end-use markets; and other factors of which we are currently unaware or deem immaterial. Readers are cautioned not to place undue reliance on our forward-looking statements. Forward-looking statements speak only as of the date they are made, and we assume no obligation to update such information in light of new information or future events.

For Further Information: H. Gene ShielsDirector of Investor Relations(281) 504-4886

KRATON PERFORMANCE POLYMERS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(In thousands, except per share data)

Three months endedMarch 31,

2016

2015

Revenue

$

419,923

$

261,429

Cost of goods sold

326,105

214,868

Gross profit

93,818

46,561

Operating expenses:

Research and development

10,576

7,947

Selling, general, and administrative

49,862

26,949

Depreciation and amortization

30,154

15,296

Total operating income (loss)

3,226

(3,631)

Gain on sale of assets

45,251

—

Loss on extinguishment of debt

(13,423)

—

Earnings of unconsolidated joint venture

78

76

Interest expense, net

(33,838)

(6,120)

Income (loss) before income taxes

1,294

(9,675)

Income tax benefit (expense)

86,251

(66)

Consolidated net income (loss)

87,545

(9,741)

Net loss attributable to noncontrolling interest

542

285

Net income (loss) attributable to Kraton

$

88,087

$

(9,456)

Earnings (loss) per common share:

Basic

$

2.87

$

(0.30)

Diluted

$

2.84

$

(0.30)

Weighted average common shares outstanding:

Basic

30,026

31,067

Diluted

30,289

31,067

KRATON PERFORMANCE POLYMERS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except par value)

March 31, 2016

December 31, 2015

(unaudited)

ASSETS

Current assets:

Cash and cash equivalents

$

78,378

$

70,049

Receivables, net of allowances of $849 and $244

206,210

105,089

Inventories of products

347,257

264,107

Inventories of materials and supplies

17,876

12,138

Other current assets

66,077

29,956

Total current assets

715,798

481,339

Property, plant, and equipment, less accumulated depreciation of $391,918 and $382,157

878,949

517,673

Goodwill

740,150

—

Intangible assets, less accumulated amortization of $111,196 and $100,093

Severance expenses, professional fees, and other restructuring related charges which are primarily recorded in selling, general, and administrative expenses.

(b)

Charges related to the evaluation of acquisition transactions which are recorded in selling, general, and administrative expenses.

(c)

In 2015, the reduction in costs is due to additional insurance recovery related to the Belpre, Ohio, production downtime, which is primarily recorded in cost of goods sold.

(d)

Startup costs related to the joint venture company, KFPC, which are recorded in selling, general, and administrative expenses.

(e)

For the three months ended March 31, 2016 and 2015, respectively, $2.7 million and $2.2 million is recorded in selling, general and administrative expenses, $0.2 million and $0.2 million is recorded in research and development expenses, and $0.2 million and $0.2 million is recorded in cost of goods sold.